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Measure of Damages

. Bowman v. Martineau

In Bowman v. Martineau (Ont CA, 2020) the Court of Appeal engaged in a useful summary of the measure of damages, in this case whether negligence causing a real estate purchaser to purchase damaged property was calculated by the cost of repair the property or its resulting diminution in value:
(1) The Measure of Damages

(a) Applicable Legal Principles

[8] The general, well-settled rule for the assessment of compensatory damages in tort actions is that, as far as damages can accomplish this, the plaintiff is entitled to be put into the position he or she would have occupied but for the injury caused by the defendant: Nan v. Black Pine Manufacturing Ltd. (1991), 1991 CanLII 1144 (BC CA), 80 D.L.R. (4th) 153 (B.C.C.A.), at p. 157.

[9] Restoration of the plaintiff’s position should not amount to under or over compensation but only result in the amount of compensation that will make the plaintiff whole. Accordingly, limits are placed on compensation: a plaintiff can generally only recover for actual injury caused by the defendant’s conduct, and not for damages that are too remote in that they are speculative or not reasonably foreseeable: Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at para. 13; Deloitte & Touche v. Livent Inc., 2017 SCC 63, [2017] 2 S.C.R. 855, at para. 77.

[10] Achieving the restoration of the plaintiff’s position requires an approach that is not unnecessarily complicated or rule-ridden but responsive to the facts of each given case: James Street Hardware and Furniture Co. v. Spizziri, 1987 CanLII 4172 (Ont. C.A.), at pp. 27-28.

[11] In cases where the harm to be compensated for is property damage, damages have typically been assessed either as the cost to repair the property or its resulting diminution in value. The historical common law position was that damage caused to real property was measured by the diminution in the value of the land: C.R. Taylor (Wholesale) Ltd. and others v. Hepworths Ltd., [1977] 2 All E.R. 784 (Q.B.) at pp. 790-91, citing Jones v. Gooday (1841), 8 M. & W. 146. However, later English cases held that the cost of reinstatement, or repair, could be awarded in an appropriate case: Dominion Mosaics and Tile Co. Ltd. and another v. Trafalgar Trucking Co. Ltd. and another, [1990] 2 All E.R. 246 (C.A.), at pp. 249-50; Hepworths, at p. 791, citing Harbutt’s Plasticine Ltd. v. Wayne Tank and Pump Co. Ltd., [1970] 1 All E.R. 225 (C.A.). These later authorities have been received into the law of this country: James Street Hardware; Nan, at pp. 157-158. The application of one or the other of these approaches is governed by the specific facts of the particular case and the further regulating factors of causation, reasonableness and proportionality that I have already referenced.

[12] In professional negligence cases involving real property, like the present, careful attention must be paid to the causal link between the injury suffered and the act of negligence. Depending on the facts, the negligence may not actually have caused property damage, rendering the case law concerning the assessment of damages for harm to property inapplicable.

[13] In some cases, the professional negligence will actually have caused the defect in the property or will have caused the plaintiff to lose the right to recover for that defect. For example, in Kienzle v. Stringer (1981), 1981 CanLII 1851 (ON CA), 35 O.R. (2d) 85 (C.A.), leave to appeal refused, [1982] S.C.C.A. No. 252, the solicitor’s negligence in conveying the property caused a defect in title and the plaintiff was entitled to recover the cost of putting the title in good order. In Jarbeau v. McLean, 2017 ONCA 115, 410 D.L.R. (4th) 246, the solicitor negligently failed to commence an action against an engineer who negligently certified the defective construction of a new home. But for the negligence, the plaintiffs would have recovered the cost to repair the property against the negligent engineer, whose negligence had, in turn, caused the defect in the property. Finally, in Tabata v. McWilliams et al. (1982), 1982 CanLII 2159 (ON CA), 40 O.R. (2d) 158 (C.A.), the solicitor negligently failed to warn the client, who was purchasing a home, of the need for an occupancy permit prior to occupation of the property. But for the negligence, the plaintiff could have insisted on an occupancy permit being obtained by the vendors prior to closing, which would have “in all probability” involved the repair of the property. Given these cases involve defects in property, the case law concerning the assessment of damage to property applies.

[14] In other cases, however, the professional negligence will not have caused damage to property, but rather will have merely caused the plaintiff to enter into a transaction they would otherwise have avoided. For example, in Messineo et al. v. Beale (1978), 1978 CanLII 1570 (ON CA), 20 O.R. (2d) 49 (C.A.), a solicitor negligently failed to discover and report a pre-existing defect in the vendor’s title but did not cause the defect. In Toronto Industrial Leaseholds Ltd. v. Posesorski (1994), 1994 CanLII 7199 (ON CA), 119 D.L.R. (4th) 193 (Ont. C.A.), a solicitor negligently failed to report the existence of an option to rent the purchased property at below current market rents but did not bring the option into existence. Finally, in Krawchuk v. Scherbak, 2011 ONCA 352, 106 O.R. (3d) 598, leave to appeal refused, [2011] S.C.C.A. No. 319, the real estate agent negligently failed to take any steps to inquire into the accuracy of the vendors’ representations concerning the condition of the property, but did not cause its poor condition. In these cases, damages were assessed by looking to the overpayment paid by the plaintiff and their consequential damages, rather than the cost to repair or remove the defect.

....

[24] As the appellants’ wrong did not cause the property defect, the respondents are not entitled to demand what they could never have had even if the appellants had not been negligent, namely, a house free of mould and water damage: Posesorski, at p. 210; Avrom Evenchick (Trustee of) v. Ottawa (City) (1998), 1998 CanLII 591 (ON CA), 111 O.A.C. 132 (C.A.), at para. 12; Samson v. Lockwood, 1998 CanLII 1920 (Ont. C.A.), at p. 13. They are only entitled to damages to compensate them for entering into a bad transaction they would have otherwise avoided. These damages will include their overpayment for the defective property, namely, its diminution in value.[2]
. 2049390 Ontario Inc. v. Leung

In 2049390 Ontario Inc. v. Leung (Ont CA, 2020) the Court of Appeal made this comment on the replacement level of damages sought in this insurance broker negligence case:
[52] In addition to finding that the respondents met their duty of care and or contractual obligations to the appellant, the trial judge noted that a party is not entitled to replacement cost damages where there is no evidence it would have diligently replaced the building with a building of like kind and quality: Carter v. Intact Insurance Company, 2016 ONCA 917, 133 O.R. (3d) 721, at paras. 48-49, leave to appeal refused, [2017] S.C.C.A. No. 53.

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